Specifying Guide

Construction Guarantee issue bonds in a standard format that is concise, easily understood and fair to all parties.

Sometimes Clients, or their legal advisers, will require a contractor to procure a bond in a format that would be considered unusual or obscure.

If the client chooses this route, several factors need to be considered.

Commercial Availability
It is pointless specifying a non-standard bond wording if that format is not commercially available to the contractor. Smaller contractors can have difficulty obtaining unusual bond wordings from their usual bondsman.

Less is not More
Clients and their legal advisers are often attracted to bond wordings that contain few conditions. However, this creates ambiguity that less reputable bondsmen can exploit which may lead to dispute or even litigation.

Onerous Clauses = Onerous Terms
Requesting that contractors submit bonds that contain onerous or unusual clauses can result in the contractor having to comply with some strict terms in order to procure the bond. This can have an immediate destabilizing effect on the contractor.

No Cash Collateral
In order to procure a bond a contractor should never have to deposit cash as collateral security. This practice makes no commercial sense and can precipitate the very event that the bond is in place to protect against.

Collectability
A bond is only as good as the financial strength of the guarantor and their ability and willingness to pay claims.